Real World Economics: Four critical issues Romney, Obama have skirted

We are right up to the election, so it is a good time to review how the two presidential candidates stand -- or refuse to stand -- on some important economic issues.

Trade: Neither candidate is wholeheartedly for trade and neither is against it. Listening to the debates and sound bites would lead one to believe the only nation we trade with is China. Mitt Romney says he will get tough about their currency manipulation the first day he is in office. Barack Obama says he got tough with them on our imports of cheap tires. Most economists would turn thumbs down on either action.

Participation in multilateral finance and trade organizations: It is striking that during the third debate, supposedly devoted to foreign policy issues, neither candidate mentioned any multilateral institution in which our nation participates, not even NATO. Nor did they mention the World Trade Organization or the International Monetary Fund.

These are organizations both the left and the right love to hate. They also are organizations we helped set up after World War II, that have worked to our own benefit repeatedly over the decades since, and with which every new administration eventually decides it needs to work, regardless of what prior campaign rhetoric implied. Yet, listening to both Obama and Romney, one might conclude these two organizations had disappeared from the face of the earth.

Why does it matter? The events of 2008 demonstrated how a financial crisis can propagate from one continent to another. The 17-nation Eurozone and the rest of Europe are balanced on a financial cliff right now, and they are not likely to be safe for at least a couple of years.

Advertisement

The IMF cannot do much by itself to solve the situation, but it can play a vital role, primarily by giving governments political cover to take measures they could not otherwise do. Contrary to popular opinion, we don't have much money tied up in the IMF, and we long have had disproportionate say in its operations.

It is to our advantage that it continue to play a role in international finance.

Given their apparent general outlooks, both candidates probably feel the same way, but neither thinks it convenient to affirm that. Someone should.

Ditto for the WTO. There is even more hatred on the political extremes for this organization than the IMF, despite the fact that trade liberalization under the aegis of the General Agreement on Tariffs and Trade, the WTO's predecessor organization, did more for post-WWII global economic growth and conflict reduction than any other single factor.

However, the WTO is misunderstood and hated in many countries beside ours.

The WTO is the forum in which disputes like currency manipulation best could be settled, but this won't happen until there is some international consensus on broadening its dispute-resolution powers to include exchange rate policies.

We could achieve a lot for ourselves and the world by exercising leadership, but the Obama and George W. Bush administrations have been AWOL on this, and I doubt Romney would do much more.

Environment: This is another topic on which both candidates have said little. Polls show that citizens in both parties value a clean environment. Furthermore, a majority of Americans believe that human-caused climate change exists.

It is very likely that, based on past statements, Obama and Romney's personal views are very similar on this. But both are too buffaloed to raise the issue in public.

And neither is willing to say much about the sorts of everyday pollution problems over which there is little controversy.

Obama favors continued subsidies in one form or another for "green technology" and wants to halt tax subsidies to crude oil production. He is not willing to note how long it will take for the first to have much effect or how small the latter are relative to either the federal budget or oil company revenues.

Romney decries excessive regulation and promises to reduce it. But he refuses to embrace the policy approaches his own Republican economic advisers like Greg Mankiw and Glenn Hubbard advocate, namely taxes on emissions and tradable emissions permits. I am sure that in private, he understands why virtually all economists, across the political spectrum, favor these over our current approach and agrees with their logic. However, his party, with the exception of a few people like John McCain and Lindsey Graham, has fled economic sense on this for two decades. There are some others, indeed probably many, who are closeted supporters who would give the idea public support were it not so toxic publicly within their party.

Obama is no better on this issue, proving a stalwart vote for old-style command-and control approaches and against either tradable permits or emissions taxes during his time in the senate.

Growing economic inequality: This may be the most important economic challenge we face. It underlies the discontent fueling many other issues. But neither candidate says much that indicates any appreciation of the complexity of the issue. Raising taxes on those earning more than $250,000 per year is Obama's predictable response. Romney says tax cuts will foment miraculous growth in the economy, providing more jobs for the poor. Neither has substantive ideas beyond this, and neither is willing to discuss root causes in any depth.

Weigh all the factors, economic and noneconomic, and cast your vote for the candidate you think best. But don't have high expectations that the 2012 election will change much.